OPEC’s Waning Influence in One Chart

In the financial news realm, certain things are always headlines. Daily market movement. Economic releases. Politicians saying things about taxes. And … OPEC’s production decisions. Without fail, whenever the cartel and its partners (known as OPEC+) get together to set quotas, it is big news, with stories often casting it as make-or-break for crude oil prices. But today, when OPEC+ announced it will delay a planned 2.2 million barrel per day (bpd) increase to its production quotas from January to April, that wasn’t the case. Headlines were overall pretty calm, another indication sentiment is in a rationally optimistic place at the moment.

You see, this is the third time OPEC+ has delayed its planned production increases, which it first announced in June. But oil prices have mostly just done their own thing. Today, they sit lower than when OPEC+ first floated the boost.

Exhibit 1: Oil Prices Look Through OPEC+ Rhetoric

Source: FactSet, as of 12/5/2024. Brent crude oil price, 12/31/2023 – 12/5/2024.

People think OPEC is a big deal, still. We suspect it is partly because the 1970s loom so large in recent US history, and partly because of Saudi Arabia’s clout as a major global producer. But these days, OPEC generates only about 40% of global crude.^[i] The partners that comprise the + contribute an additional 20% or so.^[ii] But for all the ink production quotas get, most of the participants haven’t hit them in years, rendering them mostly symbolic. Between lax enforcement and the fact that the US and other non-OPEC nations are major producers with major global supply influence, OPEC targets aren’t much of a global supply factor.

This isn’t news. Oil prices have done their own thing, irrespective of OPEC+’s pronouncements, for years. But headlines’ acknowledgment of this is pretty new. Gone are the days when headlines warned production cuts would send prices spiking. Now, instead, we have articles musing that with production globally so high and prices thus tame, OPEC+ may have a difficult time finding a window to start pumping more. We aren’t weighing in on this forecast—the time to consider energy prices in 2025 will come another day—but the shift in tone is notable. It is another indication that sentiment has moved out of the deep pessimism that reigned when this bull market began in October 2022. That isn’t surprising, more than two years into a bull market, but it is a refreshing break from all the handwringing.